In May 2010, BBVA Uruguay announced it had reached an agreement to buy the local retail banking unit of France's Crédit Agricole. The deal moved the bank, a subsidiary of Spain's BBVA, to the number two spot among local private sector banks from sixth place, with a 24% market share in loans. However, costs related to the acquisition led the bank to post a loss of 59mn pesos (US$3.14mn) last year.
In May 2010, BBVA Uruguay announced it had reached an agreement to buy the local retail banking unit of France's Crédit Agricole. The deal moved the bank, a subsidiary of Spain's BBVA, to the number two spot among local private sector banks from sixth place, with a 24% market share in loans.
However, costs related to the acquisition led the bank to post a loss of 59mn pesos (US$3.14mn) last year.
Last month, ratings agency S&P upgraded the bank's national scale counterparty credit rating to AA+ from AA, reflecting its improved competitive position following the acquisition as well as the bank's lower default levels, but warned about the challenges remaining from the acquisition, which could lead to additional costs and losses this year.
BNamericas spoke with BBVA Uruguay's country manager, Rafael González Moya, to find out how the bank plans to improve its earnings and maintain its new-found market position.
BNamericas: With the purchase of Crédit Uruguay, you climbed to the second spot in terms of market share among local private banks. Are you satisfied with that position?
González: The market share we reached through the transaction is significant, but not enough. Our goal is to keep growing and consolidating our presence in the local market. But as we usually say, we don't just want to be the largest bank but the best. And we aim to achieve that by diversifying in different market segments and developing innovative products - and above all, by simplifying our customers' lives.
We manage a balanced double goal of growing our market share and maintaining conservative risk and liquidity policies. We will strengthen our position as Uruguay's second largest private bank with growth policies that adopt BBVA's best practices in Latin America.
BNamericas: What is the cost savings plan that the bank aims to achieve with the merger?
González: The merger was completed on April 19. As from that date, we're operating as one bank, with all customers and balances included. Of course, these processes are long and complex and require fine-tuning that takes a couple of weeks after operations are merged.
We're working extensively to take advantage of the drive that these merging processes have on companies. Our goal is that the new BBVA Uruguay becomes the bank with the highest quality standards in the country, and that requires a great deal of effort.
BNamericas: How will the bank be affected by the merger costs this year?
González: The merger costs came within expectations at the time of the sale, and we don't expect surprises outside that range.
BNamericas: When do you think you will be able to recover the losses, and where do you see the bank in terms of profitability within the next 3-5 years?
González: Our goal aims at tripling the bank's current profits by 2015.
BNamericas: What growth rate are you forecasting in 2011 for the local system and the bank?
González: We are forecasting 10% increase growth for the local system and for BBVA Uruguay to post loan growth above 15% this year.
BNamericas: In which loan segments will the bank focus its offer?
González: Being a universal bank, our offer will aim at servicing corporations and SMEs, as well as high, middle and low-income individuals. In the retail segment, we will focus on mortgages and car loans this year.
BNamericas: What kind of benefits will the recent S&P upgrade bring to the bank?
González: We think that the hike acknowledges the successful acquisition of Crédit Uruguay, as well as the country's improved economic perspectives and support provided by BBVA.
Uruguay has set out big challenges amid a promising situation, and we don't want to miss out on taking part in them by contributing with BBVA's international experience, which has a distinct focus on Latin America. Moving forward in the ratings agencies' scales reaffirms and drives/encourages this focus.
BNamericas: The bank recently submitted a plan to the government that aims at increasing banking penetration in the country. What are the goals of that plan?
González: We basically presented a plan to offer the government our experience in other markets and stated our will to take on an active role in the process. BBVA's studies department recently visited Uruguay to analyze the level of banking penetration in the country. Over the next few weeks we will have a document that we will share with the government and all market participants that are interested in the issue, just like the bank did in other countries where it operates in such as Mexico, Colombia and Peru.
About the company
BBVA Uruguay completed the merger with Crédit Uruguay last month. The deal - estimated at around US$100mn - was approved by central bank BCU in January.
The acquisition allowed BBVA Uruguay to grow its loan portfolio to 657mn euros (US$940mn), second only to the local unit of Spain's Santander, and reach a 20% market share in deposits.
The merger also increased BBVA Uruguay's number of branches to 45 from nine, as Crédit Uruguay's broad distribution network with 36 branches was the country's second largest behind Nuevo Banco Comercial's (NBC).